As Venezuela Tilts Left, a Rum Mogul Reaches Out to Poor

By Jose de Cordoba

Staff Reporter of THE WALL STREET JOURNAL | November 10, 2004; Page A1 | CARACAS, Venezuela | In the early hours of Aug. 16, President Hugo Chavez announced his smashing victory in a recall referendum from the balcony of the presidential palace to thousands of red-bereted supporters. "Tremble, oligarchs tremble," he sang to the delight of the crowd below.

[Hugo Chavez]It didn't augur well for Venezuela's business establishment, which has tried by means legitimate and otherwise to unhorse the fiery leader. Mr. Chavez's self-styled "revolution" for the poor has devastated private companies and has sharply divided this country.

Not every oligarch, however, is trembling. Alberto Vollmer, 36 years old, scion of one of Venezuela's oldest families and head of a century-old rum distiller, has learned to do what few of his wealthy peers have managed: adapt and even thrive under Mr. Chavez's hostile regime. He has become an example of how this deeply polarized nation can find common ground and move ahead after years of debilitating political violence.

Mr. Vollmer's formula for survival in today's Venezuela is a shrewd mix of altruism and self-interest. When some 450 pro-Chavez families invaded his lands to take them over, Mr. Vollmer didn't call the police but opted instead to negotiate. By reaching out to the other side of Venezuela's class chasm, he fostered a social peace that has permitted his rum company, C.A. Ron Santa Teresa, to function. He has made some surprising alliances along the way: The leader of the land invaders -- a former comrade in arms to Mr. Chavez -- asked Mr. Vollmer to be his son's godfather.

Calling himself the black sheep of his patrician family, Mr. Vollmer has thrown himself into social projects in the barrios that sit close to his family's eclectically decorated hacienda in the Aragua valley, about 47 miles west of Caracas. One program, named "Alcatraz" after the prison, rehabilitates gang members. He recently flew one of them first class to Sarajevo to attend a World Bank conference on social programs.

"If you have growth and well being in the company but not in the community outside, then you are dead meat," says Mr. Vollmer.

In a region with the world's biggest divide between rich and poor, few of Latin America's elite have concerned themselves with those outside their mansion walls. But with relentless poverty and the growing class abyss driving a rising tide of populism, some business leaders are slowly pursuing strategies similar to Mr. Vollmer's. Mexican telecommunications magnate Carlos Slim last year held a retreat with fellow billionaires to argue that governments should pursue growth-oriented economic policies to ease poverty. And he forged an alliance with the leftist mayor of Mexico City to redevelop the central historic district.

Mr. Vollmer has stoked resentment from some peers who regard him as an opportunist and class traitor. Many were furious when Mr. Vollmer appeared on television with Mr. Chavez just weeks before August's recall election, saying Mr. Vollmer aided an implacable and dangerous enemy.

Others, however, are starting to see his approach as a blueprint for the future. "I want to do the same thing," says Alexander Degwitz, a Venezuelan who helps manage a family conglomerate of cattle ranches, coffee farms and financial-services companies. "You can't be rich and turn your back on society."

[Alberto Vollmer]Colombian President Alvaro Uribe has conferred with Mr. Vollmer for tips on how to peacefully reintegrate former combatants in Colombia's civil war back into society. Harvard Business School and 10 other business schools in Latin America and Spain are using Mr. Vollmer's experience as a case study.

Since Mr. Chavez, 50, took power in 1999, business and government have been at each other's throats. Political strife has been the main factor in the closure of a third of private businesses, costing Venezuela some 2.5 million jobs. In the past five years, extreme poverty has nearly doubled, to 40% of the population, according to a study by the Andres Bello Catholic University in Caracas.

Despite the bleak conditions, Mr. Chavez's government survived a coup supported by many businesspeople, as well as a devastating strike by the all-important oil industry -- the country is the world's fifth-largest oil exporter. A beneficiary of recent high oil prices, Mr. Chavez has plowed money into social programs, setting up soup kitchens and sending thousands of Cuban doctors to live in barrios throughout the country. After winning the recent referendum -- and overcoming accusations of fraud -- he immediately vowed to "deepen" his revolution for the poor. If he wins another term in 2006 elections, he would govern for another six-year term.

Mr. Chavez blasts everyone who opposes him, from itinerant peddlers to elderly matrons, as oligarchs. But Mr. Vollmer is one of the few real oligarchs left in Venezuela, where most of the old families lost their wealth generations ago. With vast holdings of land in Caracas as well as in Aragua, the low-key Vollmers were, until recent years, considered the country's wealthiest family.

Mr. Vollmer, who was educated in the U.S., Europe and Venezuela, is the oldest son in a family of six surviving siblings. He has a degree in civil engineering and worked for the alternative housing department of a state government, helping to build public housing, before he joined the family business in 1996.

Bold and charismatic, Mr. Vollmer is in a good position to act as a bridge between his divided countrymen. He descends from a German merchant who, in the early 19th century, married Panchita Ribas, a cousin of Venezuela's independence hero, Simon Bolivar. Young Panchita was saved from marauding royalists by Juana, the black slave who had nursed her as a baby. As family lore has it, the slave saw the child being led away by a cavalryman, and bartered for the little girl's life with the money she had saved to buy her own freedom. A few years later, Bolivar announced the end of slavery from the stoop of a hacienda that still stands on the cane fields of Mr. Vollmer's property.

Today, the borders of Mr. Vollmer's 208-year-old hacienda, Santa Teresa, are ringed by barrios where life is dominated by gangs of dead-end delinquents. With unemployment among young men at 60%, the Aragua area is one of the country's most violent. Mr. Chavez's fiery message of class conflict sells well here, making Aragua one of the president's strongest redoubts.

As fate would have it, Mr. Vollmer took control of his company in 1999, roughly the same time Mr. Chavez took over Venezuela's government. Neither the company nor the country were in good shape.

Founded in 1796, the Hacienda Santa Teresa was bought by the Vollmer family in 1885 and has been producing rum since 1857. In time, the company became the second-largest rum distiller in Venezuela. But in 1999, the distiller was on the brink of bankruptcy, burdened by debt and losing market share. Mr. Vollmer and his brother Henrique, midlevel executives at the time, flew to Rome, where their father Alberto was Venezuela's Vatican ambassador. They got his backing to restructure the company, cutting product lines to 17 from 262 and rescheduling debt. Back in the black, Santa Teresa has increased its annual sales from about $22 million in 1999 to some $30 million in the fiscal year ended in August.

In that period, Mr. Chavez, a cashiered lieutenant colonel who led a failed coup in 1992, pursued his own transformation of Venezuela. Comparing himself to Jesus Christ, the messianic Mr. Chavez, a close ally of Cuban dictator Fidel Castro, commanded a massive following among Venezuela's majority poor, who had long resented their exclusion from the country's oil cornucopia. Mr. Chavez's inflammatory rhetoric and calls for seizures of "unproductive" lands soon provoked waves of land invasions.

On the night of Feb. 26, 2000, some 457 families seized a large swath of land belonging to Mr. Vollmer across from his hacienda. "It was literally a wake-up call," Mr. Vollmer told a group of young Venezuelan business leaders over a recent breakfast of scrambled eggs. His guests, heirs to some of Venezuela's largest family businesses, face the same social pressures and came to his hacienda seeking his advice.

[On the Decline]That night, Mr. Vollmer told his guests, he had three choices. He could let the takeover stand, creating a precedent for further invasions. He could call the police to oust the invaders by force, a solution that didn't seem advisable or even possible, given the angry mood in Venezuela. ("I called the governor who said, 'Are you crazy? That's my political base,' " remembered Mr. Vollmer.) Or, he could negotiate.

Using techniques learned at a Harvard Law School conflict-resolution course for executives, Mr. Vollmer set out to parlay with the squatters' leader, Jose Omar Rodriguez, a former Air Force sergeant and veteran of Mr. Chavez's failed 1992 coup.

A deceptively meek looking man with wire-rim glasses and a balding pate, Mr. Rodriguez recalls that the meeting was like the first round of a boxing match. "We were like two fighters, each probing to find the other's weak spot."

Mr. Rodriguez told Mr. Vollmer the latter had a lot of land, and the squatters needed housing. Mr. Vollmer said he didn't want a chaotic Venezuelan barrio on the front gates of Santa Teresa. But Mr. Vollmer had some sympathy, too. As a college student in Caracas, he lived for a while in a barrio, helping a local priest improve the neighborhood. The squatter leader and the young oligarch soon found they had common ground. "Our shared weak spot was that we both had social sensitivity," says Mr. Rodriguez.

Over the following weeks, Messrs. Vollmer and Rodriguez brought the state governor into the negotiations. Mr. Vollmer agreed to donate 60 acres as well as plans for a 100-house model community. Mr. Rodriguez agreed that the families would pay mortgages, held by a government housing agency, and provide the labor to build the houses. He also agreed to winnow the number of families down to a more manageable 100 from 457. The state and federal governments agreed to provide financing to build the proposed neighborhood. The result is the tidy urban development of Camino Real, inaugurated this year.

Meanwhile, Mr. Vollmer and Mr. Rodriguez drew closer. Mr. Vollmer became the godfather of Mr. Rodriguez's son, named Hugo Rafael, after President Chavez. Mr. Vollmer invited Mr. Rodriguez to management courses for Santa Teresa executives. Last year, Mr. Vollmer sent Mr. Rodriguez to a conflict-resolution course at Harvard, working his contacts at the U.S. embassy to get a visa for Mr. Rodriguez, who, as a participant in Mr. Chavez's failed coup, had been barred from entering the U.S.

For Mr. Rodriguez, the trip was an eye-opener. "Drivers stopped at red lights," marvels Mr. Rodriguez. "There's no reason we can't do that."

Concerned about growing population pressures in Aragua, Mr. Vollmer is now working on a plan to attract tourism to the valley, which boasts Venezuela's only steam railroad. To hash things out, Mr. Vollmer earlier this year held three weekend-long marathon sessions with some 75 community leaders, ranging from gang members to the mayor. At first wary of his intentions, local officials say they now are on board.

Another violent incident led Mr. Vollmer to his most controversial foray into social policy. In February 2003, three members of a youth gang mugged a company security guard, stealing his pistol. Weeks later, Santa Teresa's security chief captured one of the young criminals, 20-year-old Derjuis Rebolledo, known as "Cara de Leon" or "Lion Face," and took him to see Mr. Vollmer.

On impulse, Mr. Vollmer made Mr. Rebolledo an offer. He could return the stolen gun and do three months hard labor clearing land to make firebreaks on Santa Teresa for no pay. Or, he could take his chances with the Aragua police, who have been known to summarily execute criminals. A week later, Mr. Rebolledo, along with 22 gang buddies who wanted the same deal, showed up at Santa Teresa, ready to work.

"Alcatraz" was born. In the mornings, participants do farm work. Later in the day, they see psychologists and study to complete high school or grammar school. If they complete the first three months, Mr. Vollmer gets them temporary jobs at Santa Teresa and tries to place them in other companies.

Improvising the program day to day, Mr. Vollmer, an avid rugby player, made the rough contact sport part of the curriculum, figuring it was a way for young criminals to let off steam while learning the value of cooperation and grit. When members of the first gang complained that, unarmed, they were easy prey for a rival gang, Mr. Vollmer met with the second gang and convinced them to join Alcatraz. The former enemies now face off in rugby games. "People better themselves," says Darwin Ospino, 20, a feared former gang leader better known as "Patapiche" or "Smelly Feet." "We were enemies and now we are friends."

Two more gangs have since joined the program. Alcatraz and Mr. Vollmer's other social efforts are funded with about 2% of the rum company's profits, or $100,000. The Andean Development Corp., a regional development bank, kicks in an additional $35,000 to Alcatraz.

At first, townspeople were suspicious, concerned that Alcatraz was a way to reward criminals. But in a region where law enforcement is often scarce, arbitrary and corrupt, many now see the program as an effective way to disarm gangs. Police and local officials say it has helped slash local crime by as much as 50%. "It's been a big success," says Commissioner David Borges, head of the community police.

These days, with his business in solid shape and his brother Henrique helping to run it, Mr. Vollmer spends a third of his time on Alcatraz. It's clear he enjoys himself as he drives around the barrios, exchanging high fives with gang members, who call him by his first name. "Alberto is the nut in the family," says Jimin Perez, Santa Teresa's security chief. "He can talk to anybody."

The Alcatraz program has attracted attention in Venezuela and abroad. President Chavez has praised Mr. Vollmer as a true revolutionary. (Mr. Vollmer, for his part, says he has always voted against Mr. Chavez.) In an August World Bank congress on social programs, Alcatraz was selected as a model. Last month, Mr. Vollmer presented Alcatraz in Mexico City at an Inter-American Development Bank conference attended by leading Latin American businessmen.

Not everyone is a fan. In July, Mr. Vollmer went on television with Mr. Chavez and other businessmen the same night that Fedecamaras, Venezuela's main business organization, had its annual convention. Mr. Vollmer outlined his programs, saying business had an obligation to fight poverty.

Mr. Vollmer received dozens of angry e-mails. Some onetime friends still won't forgive him. "That rum is poison," fumes Dr. Eduardo Rivero, a die-hard Chavez opponent who runs a health-maintenance organization. "I used to buy cases of the stuff for company parties, but no more."

Mr. Vollmer vows to invite Dr. Rivero to Santa Teresa and give him the rundown on his projects. He makes light of the one-man rum boycott, joking, "He's a whiskey drinker anyway."